If a company has a budgeted production cost of $150,000 and actual production co

If a company has a budgeted production cost of $150,000 and actual production cost of $160,000, what is the cost variance?

If a company has a budgeted production cost of $150,000 and actual production cost of $160,000, what is the cost variance?

Step 1: Identify the budgeted production cost, which is $150,000.
Step 2: Identify the actual production cost, which is $160,000.
Step 3: Use the formula for cost variance: Cost Variance = Actual Cost - Budgeted Cost.
Step 4: Substitute the values into the formula: Cost Variance = $160,000 - $150,000.
Step 5: Calculate the difference: $160,000 - $150,000 = $10,000.
Step 6: Determine if the variance is favorable or unfavorable. Since the actual cost is higher than the budgeted cost, it is unfavorable.

Cost Variance – Cost variance measures the difference between actual costs and budgeted costs, indicating whether a company is over or under budget.